Why Do Hard Inquiries Hurt Your Credit Score?

If you’re like almost any adult in the United States, you’ve probably applied for a credit card or loan and noticed that a hard inquiry was added to your credit report. A single hard inquiry may have lowered your credit score by a few points and so you might be wondering why do hard inquiries hurt your credit score? We will answer this question in much detail below.

Why Do Hard Inquiries Hurt Your Credit Score?

Hard inquiries hurt your credit score because the credit reporting bureaus take into account the amount of new credit you’ve applied for when calculating your credit score. The more new credit you have, the lower your credit score will be because people with more hard inquiries are more likely to default on their financial obligations. As such, hard inquiries lower your credit score so that your credit score accurately reflects the risk you represent to lenders and creditors who want to lend you money.

That said, a single hard inquiry can lower your credit score by 5 to 10 points, and in addition to hurting your credit score, having too many hard inquiries on your credit report may raise red flags to lenders and creditors because it demonstrates that you’re actively seeking credit and becoming too reliant on credit because you may be facing some financial trouble. As such, you should avoid submitting too many credit applications within a short period of time to avoid being viewed in a negative light by lenders and creditors.

Also, experts in the field of credit scores state that statistics have demonstrated that persons with 6 or more hard inquiries on their credit report are 8x more likely to default on their financial obligations than someone without any hard inquiries on their credit report.

Having said that, the good news is that hard inquiries only remain on your credit report for 2 years from the date that the lender reviewed a copy of your credit report. After 2 years, the hard inquiry is automatically removed from your credit report.

Although a hard inquiry remains on your credit report for 2 years, many experts state that the impact it has on your credit score is gone within 12 months of the inquiry being added to your credit report.

In the event that a hard inquiry remained on your credit report for more than 2 years, you should either contact the lender who added the hard inquiry and ask them to remove it as it has expired or you can dispute it by filing a dispute with the credit reporting displaying the expired hard inquiry and asking them to remove it.

After you’ve filed a dispute, the credit reporting bureau will conduct an investigation to verify that the hard inquiry incorrectly remains on your credit report. If they find that it has, they will remove it from your credit report and inform you that it’s been removed.

What is a Hard Inquiry?

For those who are unaware, a hard inquiry is placed on your credit report whenever you apply for a credit card, auto loan, auto lease, mortgage to buy a home or take out a student.

A hard inquiry is placed on your credit report indicating that your lender has requested a copy of your credit report to assess your creditworthiness before lending you money.

Although a single hard inquiry will not lower your credit score by much, racking up too many hard inquiries within a short period of time will significantly lower your credit score and shows future lenders that you’re actively seeking credit, which may raise red flags for some lenders.

On the other hand, a soft inquiry is added to your credit report whenever a lender or credit reviews your credit report for a purpose other than to make a decision to lend you money. A soft inquiry, unlike a hard inquiry, does not lower your credit score and does not count against you.

How Many Hard Inquiries Should You Have On Your Credit Report?

The fewer the hard inquiries you have on your credit report, the better your credit score will be. That said, there is no magic number of hard inquiries that you should have on your credit report. However, as a rule of thumb, you should not have 6 or more hard inquiries on your credit report.

6 or more hard inquiries raise red flags to lenders because it demonstrates that you’re actively seeking credit, which causes many lenders to perceive that you’re struggling financially and are therefore seeking credit to stay afloat.

Although there is no specific number of hard inquiries that you should have on your credit report, some lenders and creditors have requirements on the maximum numbers of hard inquiries that you can have on your credit report for them to lend you money.

For example, some mortgage lenders will not approve you for a home loan if you have more than 2 to 3 hard inquiries within the past 2 years. So, if you’re planning a major purchase and need to borrow money, you should check with the lender to see their requirements on the number of hard inquiries that you can have on your credit report.

How to Keep Hard Inquiries From Hurting Your Credit Score?

The best thing that you can do to prevent hard inquiries from hurting your credit score is to not apply for too many credit cards or loans within a short period of time. If you want to open a credit card or take out a loan to buy a car or home, you should check your lenders requirements before applying. This saves you from having a hard inquiry placed on your credit report only to be denied the credit card or loan.

You can usually find the lenders requirements on their website. In the event that you can’t, just run a Google search for the credit product that you’re applying for you and you will find a ton of information on the credit product that you want to apply for.

Do this and you will be able to save yourself from unnecessary hard inquires on your credit report.

Also, if you’re not already in the habit of checking your credit report, you should periodically check your credit report to ensure that there is no incorrect negative information that is dragging down your credit score.

If there is inaccurate information, you can file a dispute with the credit reporting bureau displaying the incorrect or inaccurate information to have it removed from your credit report.

Can You Have a Hard Inquiry Removed From Your Credit Report?

Removing a valid hard inquiry is extremely difficult, if not impossible, to do. However, if a hard inquiry has incorrect information or was added to your credit report by mistake, you can either contact the lender and ask them to remove it from your credit report or you can file a dispute with the credit reporting bureau displaying the incorrect hard inquiry, asking them to remove it from your credit report.

Credit Score Planet Frequently Asked Questions

1. How many points does a hard inquiry lower your credit score?

A single hard inquiry can lower your credit score by 5 to 10 points. That said, you should not worry about losing a few points for a hard inquiry, so long as you continue making payments on your credit cards and loans, your credit score will bounce back fairly quickly. That said, if you apply for too many credit cards and loans within a short period of time, you can significantly lower your credit score. So, only apply for the credit product that you need.

2. How many hard inquiries is bad?

There is no magic number of hard inquiries that you can have. However, experts have agreed that anything beyond 6 hard inquiries is too many hard inquiries.

3. Does your credit score go up when a hard inquiry is removed from your credit report?

Yes, your credit score may go up after a hard inquiry is removed from your credit report.

4. Why do hard inquiries lower your credit score?

Hard inquiries lower your credit score because the credit reporting bureaus factor in the number of hard inquiries or new accounts that are on your credit report. They factor them in to alert future lenders and creditors that you’ve been seeking credit. The more hard inquiries you have, the more risky you will seem to lenders.